What Constitutes Good Credit?

There are a lot of tall tales floating around out there regarding credit, especially when it comes to what determines good and bad credit. One can’t turn on the television or go a day without receiving a piece of spam where the premise surrounds people who have gone bankrupt by abusing their credit cards. Many of these stories are extreme examples, but they still do not shed light on the million dollar question: What’s the difference between good and bad credit?

Good Credit: Good Credit: Good credit is important for a lot of reasons; as it affects almost every major buying decision in your life. Good credit can help you get a decent rate on a car loan, home mortgage or even a lease. Good credit might even land you a new job—since often employers will check credit history to determine if you are an ethical person or not.

So how do you get good credit? You’ve got to have good credit to get good credit. Confused? It’s simple really. Good credit ratings are gained when you borrow money say from a bank or a credit card company--and pay it back on time for the amount stated. Your credit will improve every time a good report is sent to the credit bureau stating that you have paid on time and in full.

Good Credit Results: Having a solid credit report allows you to borrow more money at better rates, and take advantage of leasing opportunities. Why is that? Because good credit proves to banks and leasing companies that you are financially responsible person based on your credit history you are a responsible person.

Bad Credit: Bad credit is just as the title suggests, bad. While good credit can help you qualify for leases and loans, bad credit can keep you from qualifying. Bad credit will most assuredly increase the cost of funds you borrow as well as the amount and type of collateral considered when reviewing your request for financing or leasing. It can also keep you from attaining credit cards and could possibly reduce your chances of buying/renting a home.

If you have concerns about understanding your credit situation, talk to a financial or tax advisor to help you take the next step in getting and keeping good credit.